Airline industry: Changed forever

Terrorists - using hijacked American and United airlines passenger planes -- devastated the nation Tuesday with the most horrifying attack in history by leveling the World Trade Center and crashing into the Pentagon.

Now no one will want to fly.

And that will crush any hopes the already downtrodden industry might have had in recovering in the near term. In the clenches of its worst financial straits in two decades, airlines have been struggling to entice business and travel passengers with special deals and packages.

"I don't know how you get those pictures of those planes crashing into the World Trade Center out of consumers' heads," said PTI Securities trader Jon Najarian. "If you had even the slightest pang in your stomach about flying, now you'd never get back on one of those.

Only moments after the attack on the north tower of the World Trade Center in New York at 8:50 a.m. Eastern, the Federal Aviation Administration grounded all U.S. flights "indefinitely." Shortly after that, the south tower was hit.

It is believed that AMR Corp.'s
AMR, +27.78%
American Flight 11 was involved in the north tower, while UAL Corp.'s
UAL, +0.40%
United Flight 175 crashed into the south tower. Both were coming from Boston's Logan Airport.

Within the hour, an American plane deliberately struck the Pentagon. And then United Flight 93 went down in Johnstown, Pa.

"We are horrified," AMR Chief Executive Donald Carty said.

Airports across the country were shuttered and heightened security measures were immediately put in place. United Airlines put the brakes on all flights worldwide and pledged $25,000 to the families of each passenger who perished in its two planes that crashed.

It's going to be tough to coax the flying public back into their seats. "It's going to be disastrous," predicted ABN Amro airline analyst Ray Neidl from Chile. "This will plunge the world economy into a real slowdown, and there will be a real slowdown in travel for awhile.

"The whole aviation system will be really negatively affected by this," he said.

On Monday, airline stocks closed at or near 52-week lows as the industry braced for another round of ugly passenger numbers. The Amex Airline Index ended the session at 116.97 - a sight it hasn't seen in more than four years. All financial markets were closed Tuesday and will be through Wednesday.

On Tuesday, almost in tandem with the first reports of the attack on the World Trade Center, UBS Warburg analyst Sam Buttrick sent a note to clients upping to $2.3 billion his full-year net loss for the industry. Coincidentally, he also upgraded to "buy" his recommendation on American parent AMR.

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